The Department of Transportation will end Cash-for-Clunkers Monday and not a moment too soon.
Initially hailed as an economic shot in the arm for the auto industry, the program has become a poster child for government incompetence. In violation of the federal law that required dealers be paid within ten days of turning in a transaction (the program is now 27 days old) DOT has paid a paltry $140 million to dealers — or just 7.3 percent of the $1.91 billion in rebates submitted.
As a result, dealers like Ron Morehead Jr. — general manager of a Honda dealership in New York — have already shunned the program. “I’ve got to start getting paid,” Morehead told Automotive News, adding that he is out $175,000 for the 42 clunker deals he’s made. “Enough is enough.”
In a News survey, more than 90 of 710 dealers who responded said they had suspended clunker sales because of repayment concerns and other bureaucratic headaches. “It’s just a mess, an absolute mess,” says Duke Brubaker of Champion Ford in Kentucky.
The mounting disaster spurred the industry’s trade group, the National Automobile Dealers Association, to warn dealers Wednesday that they faced a “growing risk that they may not be reimbursed” for vehicles sold through the program.
Dealers and automakers have cheered the production clunkers has stimulated (even as economists predict it has merely stolen sales from future months) as a whopping 435,102 vehicles have been moved to date. But to keep dealerships afloat while DOT struggled to get its act together, both GM and Chrysler have had to advance them money. DOT’s incompetence has come at an awkward time for the Obama administration, which is touting government’s ability to run a vastly more complicated program: national health insurance.
The program was not free from political favoritism, either. The Los Angles Times has revealed that nearly 5 million “clunkers” were excluded from the program after fierce lobbying by the Specialty Equipment Market Association — a group that represents used-part sellers for classic cars.
Collectors and parts sellers were horrified that Congressional greens had ordered all clunker trade-ins destroyed. The result could have shriveled the size of the market for aftermarket parts and driven up prices, but lobbying from the group ensured that only cars 25 years old and younger would qualify.
Yet another lobby representing salvage yards and service garages also won a victory when they were able to modify bill language so that only the engine would be destroyed, allowing them to salvage parts from the rest of the vehicle.
America may be in recession, but in new Big Government Washington, the lobbying business is booming.